PARIS/MILAN, Dec 20 (Reuters) - French bank Credit Agricole
, having paid billions of euros to extricate itself
from an ill-fated Greek acquisition, is now struggling with
rising loan losses in Italy.

Its 19 billion euro ($25.2 billion) Italian consumer credit
unit Agos Ducato, the latest of a series of soured foreign bets,
is already reeling and Agricole last month took an unexpectedly
large 57 2 million euro quarterly goodwill provision for the
unit.

Some analysts are forecasting the situation may deteriorate
further. So it adds up to a situation which will likely test the
mettle of the unit's chief executive, Alain Breuils, installed
in a management overhaul in June.

A slow economy and tougher liquidity rules are squeezing
consumer lenders throughout Europe. But Italy has been
particularly tough because of cut-throat competition as well as
a recession which has pushed joblessness to multiyear highs.

"It's actually the biggest risk for them currently," said
analyst Christophe Nijdam at equity research firm Alphavalue.
"One hopes it won't prove to be on the same level of Greece."

Agos Ducato - whose problems triggered a Bank of Italy
inspection earlier this year - is only a touch smaller than
Agricole's recently shed Greek Emporiki unit, which had about 22
billion euros in assets.

While Italy's economic woes are not as bad as Greece's,
analysts at Deutsche Bank expect loan-loss provisioning related
to Agos to be at least a steady drip of around 230 million euros
a quarter through 2014.

Agricole has said it still has 2.4 billion euros of consumer
finance-related goodwill that could still be written down, not
negligible for a bank projected to earn 2.7 billion euros next
year according to Thomson Reuters I/B/E/S.

The latter had tried last year to sell its stake to Credit
Agricole, but those negotiations collapsed as the French bank's
other international woes, especially Greece, came to a head.

SHIFTING WORDS

For the French bank, still licking its wounds from Emporiki
which had cost it close to 10 billion euros since 2006,
ac cording to estimates from some analysts and bankers, A gos is
the latest in a string of bad bets on foreign expansion.

A source close to the bank said the total loss stemming from
Emporiki was actually 7.5 billion euros, including a 1.6 billion
euro tax credit.

"Credit Agricole SA has destroyed more shareholder value
through international expansion than any bank in Europe," said
one London-based analyst speaking on condition of anonymity.

"Their consumer finance business has been bad and will
probably continue to deteriorate."

Agricole shares are down 60 percent since it bought Agos
from Intesa Sanpaolo in June 2008 for 546 million
euros, compared with a 50 percent slide in the European sector
.

The bank, founded 118 years ago as a lender for family
farms, also owns the healthier Cariparma. But it too remains
vulnerable to the Italian economy, which the EU expects to
shrink 2.3 percent this year and 0.5 percent in 2013.

Agricole has also recently had to take writedowns for a
stake in Spain's Bankinter and has a stake in BES
, Portugal's top listed bank by market capitalisation.

Management has made clear it is still trying to come to
grips with the scale of the problems at Agos, which in June
named Fiat finance veteran Breuils as CEO to replace
Mirco Perelli.

"Now for Agos, frankly, it's difficult to give figures for
the future," Chief Financial Officer Bernard Delpit told
analysts last month, adding that the bank would update analysts
at year-end "if we have something clearer" for the future.

TOUGH MARKET

KBW analyst Jean-Pierre Lambert said it was disturbing that
Agricole had taken extra provisions on Agos in the second
quarter and said the matter was taken care of. "But then we see
there's still a deterioration in the third quarter with
management not feeling comfortable on the outlook."

Lending to Italian consumers has been a struggle for various
banks, although some seem to have managed it better than others.

BNP Paribas' Findomestic unit, whose risk-
management department has been reconfigured to answer directly
to BNP Paribas Personal Finance in Paris, vastly scaled back new
credits as early as 2009, a source close to the bank said.

Societe Generale's Fiditalia unit, on the other
hand, was something of a canary in a coal mine for the troubles
later suffered by Agos Ducato, suffering a big rise in its cost
of risk and a Bank of Italy intervention.

"The Italian market is a tough market, has always been very
tough," SocGen consumer finance CEO Gianluca Soma told Reuters.
"All of the major players are there."

Those include the domestic Italian banks, Deutsche Bank
and Spain's Santander and BBVA.

He added that SocGen since 2010 had taken a cautious
approach to Italy, with a substantial share of its activity
driven by car loans, seen as more resilient than other
activities such as personal loans.

At Agos, non-performing loans rose to 15.1 percent in the
third quarter from 12.1 percent at end-2011, almost double the
NPL rate at Agricole consumer finance in France. They could soar
to 26.8 percent by the end of 2014, Deutsche Bank analysts said
in a recent research note.

The Bank of Italy carried out an inspection earlier this
year and ordered Agos to boost its capital ratio to 7 percent,
translating into a 235 million euro capital hike.

Some hope Agos could see a revival helped by the management
overhaul. And longer-term, Agricole could be tempted to follow
the example of its Emporiki unit and seek a buyer for Agos.

But with tougher liquidity rules looming, there are few
apparent buyers for consumer credit operations in Europe, some
bankers say.

"Most banks are reluctant to commit to new unfunded
portfolios to their business," said one London-based banker.
"Italy is probably one of those markets where it's not easy (to
sell such assets)."
($1 = 0.7542 euros)
(Editing by Richard Chang)